Jack Townsend offers this blog on Federal Tax Crimes principally for tax professionals and tax students. It is not directed to lay readers -- such as persons who are potentially subject to U.S. civil and criminal tax or related consequences. LAY READERS SHOULD READ THE PAGE IN THE RIGHT HAND COLUMN TITLE "INTENDED AUDIENCE FOR BLOG; CAUTIONARY NOTE TO LAY READERS." Thank you.

Sunday, August 3, 2014

Article on British Deal with Swiss to Flush Out Evades and Lost Revenue -- Not So Good (8/3/14)

In this article, the authors discuss the problems to U.K. in it agreement with the Swiss to flush out tax evaders. Stephen Castle and Doreen Carvajal, Britain Fails to Find Riches It Expected in Swiss Accounts (NYT 8/1/14), here.

Some excerpts:

When the British tax authorities struck a landmark deal with the Swiss to crack down on tax evasion, they sat back and waited for the cash to flow in. Almost three years later, they are still waiting.

So far, only about $1.7 billion of the $8.4 billion windfall they once expected has materialized, and sheepish tax authorities now hope to eventually collect just a third of their original estimate.Instead, the deal struck by Britain, which once seemed a pioneer in combating tax evasion, is emerging as a cautionary tale for a growing number of nations that are feeling the pinch of Europe’s flat economy and are desperate to reap revenues from secret accounts held by the wealthy. The amounts at stake are enormous. In 2012, the British government estimated that Britons had amassed more than 40 billion pounds, or $68.5 billion, in Swiss banks. Some conservative estimates of the amount of money tucked away in tax havens and out of reach of governments worldwide range as high as $21 trillion — more than the gross domestic product of the United States.

* * * *

The lesson is that “you cannot rely on a black hole to get income,” according to Pascal Saint-Amans, a tax expert with the Organization for Economic Cooperation and Development, based in Paris. The organization is currently developing standards for a broader international deal. So far 60 jurisdictions and nations, including Switzerland, have committed themselves. But that agreement is not expected to take effect until 2017, and critics are already pointing out loopholes.

Britain’s deal with Switzerland had plenty of its own. For those who wanted to evade the British tax authorities, the agreement gave ample warning — 16 months — to shift money to other offshore havens or put it into gold, bearer funds, artwork, insurance or safe deposit boxes.

The 16-month warning was “almost absurd,” said Ian Swales, a Liberal Democrat and member of Britain’s parliamentary Public Accounts Committee. “If you had 100 pounds in your pocket and I told you that in a few weeks I would take a portion of it, then you wouldn’t really keep 100 pounds in your pocket, would you?” he said.

Other money is hidden in ever more elaborate mazes of offshore trusts and foundations often managed by trustees, usually foreign lawyers, allowing the real beneficiaries to remain secret.

* * * *

Another example is the bribery trial in Germany of Bernie Ecclestone, 83, a billionaire and Formula One tycoon considered one of the richest men in Britain. Mr. Ecclestone is accused of bribing a German banker, Gerhard Gribkowsky, with $44 million, for a favorable business deal. His defense is that he lavished the money to prevent the banker from alerting British tax authorities that it was he, and not his former wife, Slavica, who controlled a family trust set up in Liechtenstein, another famous tax haven.

* * * *

The British-Swiss deal was always contentious, with critics arguing that it amounted to an amnesty to tax evaders. The German government abandoned efforts to sign a similar agreement with Switzerland.

Under the deal with Switzerland about 18,000 Britons disclosed their names to the British authorities. Those who did not want to be identified paid a one-time levy of up to 34 percent to settle past taxes. Then last year, the Swiss started deducting a regular “withholding tax” on the interest on behalf of the British authorities.

But recently, the Swiss sent the British a list of the international jurisdictions that had received money from accounts held by Britons in Switzerland before the deductions could be made. Jason Collins, a tax lawyer with Pinsent Masons in London, said that the likely locations include Singapore and Dubai. Other experts see money shifting to Mauritius, Seychelles, and Hong Kong.

No comments:

Post a Comment

Please make sure that your comment is relevant to the blog entry. For those regular commenters on the blog who otherwise do not want to identify by name, readers would find it helpful if you would choose a unique anonymous indentifier other than just Anonymous. This will help readers identify other comments from a trusted source, so to speak.